Arnold, M. 1997. Trees as outgrower crops for forest industries; experiences from the Philippines and South Africa. Rural Development Forestry Network Paper 22a. London, UK, Overseas Development Institute.
Drawing on a number of studies, Arnold presents two long running outgrower schemes in the Philippines and South Africa, operating since 1968, and the mid-1980s, respectively. In the Agroforestry Tree Farming program of the Paper Industries Corporation of the Philippines (PICOP), and three outgrower programmes in KwaZulu-Natal landholders are growing wood for forestry processing companies, with the companies providing an assured market, and a variety of support services to growers. He outlines how the schemes originated and have developed, and analyses the schemes' impacts on outgrowers and their livelihoods.
He finds outgrower schemes to be appropriate for forest processing companies when wood is supplied at a lower cost than alternatives would provide, and with a measure of security. The appropriateness of the schemes for growers may be when growers obtain reliable income from other sources, when the land used is not required for food production, when tree growing provides a stable source of income in terms of the price of products, an assured market, and access to technical advice and inputs exists. Land security is important also, although land title may not be essential for this. Finally, outgrower schemes may not be appropriate for people with very little or no land, and hence may not reach the very poor unless different arrangements, providing them with land for tree growing without detriment to food production, are reached.
Problems arise from the terms of agreements between growers and companies in relation to the freedom to sell to other buyers, price for product, the availability of credit, and extension and support. Arnold perceives these problems to arise from a broader institutional issue, that is need to achieve balanced and equitable relationships between growers and companies. He believes growers associations, empowered and trained to negotiate for growers and to provide many of the services required but which are currently only available from the company, need to be formed. He suggests the forestry outgrower schemes may learn much from the agricultural industry, which has a long history of working within these relationships.
Curtis, A. & Race, D. 1998. Links between farm forestry growers and the wood processing industry: lessons from the Green Triangle, Tasmania and Western Australia. RIRDC Publication No. 98/41.
This report outlines the nature of the links between small-scale tree growers and the forest industry in these three important farm forestry regions in Australia, namely joint ventures, cooperatives and on-farm processing. The study found that from the growers' viewpoint, current linking arrangements can be improved. Of primary concern to farmers was the uncertainty about the economic viability of farm forestry, long-term market prospects and reliable market information, their capacity to negotiate with the industry, fair returns from joint ventures, market structures, the benefits of farm forestry for land and water degradation, and concern about tax arrangements. The findings pointed to a need to develop competitive regional markets, to make available reliable information about the industry, for industry to demonstrate its willingness to offer fair prices and hence a reasonable share in profits for growers.
In addition, the industry also needed to demonstrate a long-term commitment to farm forestry in regions, either through the development of processing infrastructure or funding of field staff. Finally growers needed to develop the capacity to negotiate appropriate, or choose from a range of grower industry arrangements.
Higman, S., Bass, S., Judd, N., Mayers, J. & Nussbaum, R. 1999. The sustainable forestry handbook. London, UK, Earthscan.
In this book issues concerning the sustainable forestry development are raised. Outgrower schemes are perceived to have potential to contribute to sustainable forest development. Based on the review of outgrower schemes in Brazil, India and the Philippines a range of benefits to growers and companies are identified. Outgrower schemes are seen to make good business sense, and increase the potential social benefit from forest management, and hence enhance support for forest managers, including companies, and the support from others, including communities. A case study of the Swiss Lumber Company scheme is presented.
Makarabhirom, P. & Mochida, H. 1999. A study on contract tree farming in Thailand. Reprinted from Bulletin of Tsukuba University Forests No. 15.
This document outlines the historical development of contract tree farming. It provides a general description of contract elements. The incentive for processing companies to enter contract arrangements with tree growers is the assurance of a continuous supply of wood from small-scale tree planting. Case studies of contract tree farming are described in relation to the contractual arrangements, the company objectives, farmers' perspectives, and problems and prospects.
The study found that farmers would enter contract tree farming agreements where they experienced poor production or labour shortages. Issues raised by growers were the lack of financial assistance with cost of inputs (fertilizer particularly), poor extension, the discouragement from the company of the diversification of farm production, and the high production risk carried. The author perceived the lack of incentive for farmer initiative in managing trees appropriately to be of particular concern.
Mayers, J. 2000. Company-community forestry partnerships: a growing phenomenon. Unasylva, 200: 33-41. Rome, FAO.
A range of formal and informal partnerships between private sector companies and communities are emerging as the importance of forest farms for the production of forest goods and services increases. In his discussion, communities may encompass farmers and individuals as well as community groups and cooperatives. To gain an understanding of the arrangements needed to establish equitable partnerships, James Mayers examines a range of existing company - community relationships, including outgrower schemes, and discusses the advantages and disadvantages of these for growing trees outside forests. He outlines some considerations for the development of good partnerships for the secure delivery of forest goods and services.
Outgrower schemes, one of the main formal partnership arrangements, vary. While, in some schemes, growers control production with the company paying the market price on delivery, in other schemes companies may have considerable control over production, or may incorporate fixed prices for products.
Sappi, an international pulp and paper company in South Africa, has run outgrower schemes with farmers since the 1980s. The company obtains trees from about 260 white farmers and 8,000 black farmers covering about 88,000 ha in KwaZulu-Natal. Under this scheme, the company provides farmers with marketing and production services, including free expertise, silvicultural training and seedlings. The purchasing agreement is also laid out in the contract. The farmers grow trees on their own, receiving advance payments from the company to assist them in meeting costs which are then deducted from market price paid at harvest. The earning from trees compares favourably to alternative land uses.
A review of the literature available on company-community partnership arrangements in Brazil, India, Philippines, South Africa, and Australia (Arnold, 1997; Clarke, Magagula & von Maltitz, 1997; Curtis & Race, 1998; Roberts & Dubois, 1996) enabled the following lessons for good partnerships to be learned: risk sharing between partners needs to be appropriate to the local context; arrangements need to cover potential fluctuations in market and hence price; growers need to improve their bargaining power to create strong, equitable partnerships; partnerships may have a negative impact on some community members; secure partnerships may require broader cooperation; extension and technical support is crucial; dealing with communities present greater challenges for companies; and the roles of government needs to be clarified and developed.
Race, D. 1999. Forest company - community partnerships: ingredients for success. Discussion Paper based on a meeting held at the International Institute for Environment and Development (IIED), London, UK on 9 April 1999.
In this paper the context in which forest company-community partnerships have developed is outlined after a review of the literature. The paper focuses on outgrower schemes and joint venture, while acknowledging self-processing, market intermediaries and grower cooperatives as additional strategies that have developed in the forest industry if contractual partnerships are not preferred. The benefits of partnerships as well as some disadvantages for growers and the industry have also been highlighted. It identifies the following key issues for the formation of effective partnerships; the need for competitive markets, for flexible contractual arrangements, for reliable assessment of long term market stability, and clarity of roles of third parties involved in, or supporting, such partnerships. In summary, four key ingredients were identified for effective partnerships.
Roberts, S. & Dubois, O. 1996. The role of social/farm forestry schemes in supplying fibre to the pulp and paper industry. Towards a sustainable paper cycle. Substudy Series 6. London, UK, International Institute for Environment and Development.
In this report social forestry schemes supplying wood fibre to the pulp and paper industry are reviewed in Brazil, India and the Philippines to identify why the schemes were initiated, how they are implemented and the perceived success of the schemes for different stakeholders.
The terms and conditions of the social forestry schemes vary considerably. The findings indicate that social forestry schemes do have a role in providing wood fibre to the industry. However, industry and growers have not always found the schemes to be successful. In addition to the need for stakeholders to be involved the negotiations for defining terms and conditions and designing the scheme, the success of such schemes is also dependent the following features for growers to become involved: security of land tenure, access to credit prior to harvest, higher returns that alternative land uses, and secure markets for wood. The main issues of concern for growers identified were the choice they have of the species they plant, their rights to determine when the trees are harvested and to whom they are sold, and the price paid for the trees.
Shingi, P. 1997. Production and marketing of poplars in India: a case study. Ahmedabad, India, Centre for Management in Agriculture, Indian Institute of Management.
The case study of WIMCO (Western India Match Company), a processing company manufacturing matches in India, was undertaken to understand the factors leading to the development of farmer-industry linkages for the commercial production of wood. To access additional wood resources for production, his company promoted poplar plantations on farmland. The study covers the poplar production from agroforestry systems in three northern Indian states.
The study finds that after motivating a large number of farmers to plant poplar a joint scheme involving WIMCO farmers and the National Bank for Agriculture and Rural development was initiated in 1983. Farmers were offered loans, and also saplings, technical support and guaranteed market by the company. Difficulties with the schemes varied between the regions. However, growers were not bound to sell trees to the company. Insecurity of supply became a major issue for the company as growers sold to other buyers, defaulting on loans. Consequently, the company altered their strategy, focussing instead on the production of saplings for sale to growers.
Vuokko R. & Otsamo, A. 1998. Social and technical considerations in establishing large-scale Acacia plantations on grassland and bushland in West Kalimantan, Indonesia. In Turnbull et al. Recent developments in acacia planting. ACIAR Proceedings No. 82. Canberra, Australia.
In this paper technical paper plantation establishment of Acacia mangim, A. crassicarpa and Eucalyptus pellita in West Kalimantan, Indonesia under a joint venture between a Finnish and two Indonesian companies is presented. The venture is working closely with communities to secure their participation in the venture as holders of traditional user rights. The arrangements under the joint venture are described, and include employment, a range of community and agricultural development benefits, in addition to ownership of a percentage of the plantation area, with the company guaranteeing to purchase wood at current stumpage rates. The effectiveness of the joint venture is demonstrated through the take up by villages, which is proceeding without difficulty. At this time the joint venture was operating in 50 villages and plantations covered 15,000 ha.
7 We would like to thank Jon Anderson, Chris Brown and members of the FAO Consultation Team for their constructive support throughout this study. In addition, members of the Resource Group, particularly Michael Arnold and James Mayers, provided valuable suggestions in the study's development stage. Neil Byron, John Turnbull, Andy Roby, Julio Alegre, Peter Lowe, Tony Rotherham, Philippe Guizol, John Vaney and Christian Cossalter also provided useful contacts for our work. A study of this nature would not be possible without the willingness of a large number people to share with us their experiences of outgrower schemes, for which we are grateful. Our colleagues at the Department of Forestry, Australian National University were generous in their support of this study. The views expressed in this report are those of the authors, and do not necessarily reflect the views of FAO, members of the Resource Group or people consulted during the course of this study. In addition, the study relied on the good faith of respondents to the questionnaire to provide fair and accurate information on specific outgrower schemes. The authors were unable to verify all of the information collected via the questionnaire and so caution readers that alternate views may be held by others involved in the outgrower schemes mentioned in this report.